TESTIMONY OF THE HONORABLE RICHARD E. CONSTABLE, III, ESQ., COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS AS PREPARED FOR DELIVERY BEFORE THE NEW JERSEY SENATE LEGISLATIVEOVERSIGHT COMMITTEE

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Trenton, New Jersey

February 24, 2014

Chairman Gordon, Vice-Chair Weinberg, and members of the Senate Legislative Oversight Committee, thank you for the invitation to appear before you today. Seated with me is my Deputy Commissioner Chuck Richman. I am happy to update you on the State’s progress helping New Jersey families and communities rebuild after Superstorm Sandy.

As you know, the Administration recently held three public hearings throughout the state. My cabinet colleagues and I presented the State’s plan for spending the second tranche of federal Community Development Block Grant-Disaster Recovery funds. And we listened to comments from dozens and dozens of affected residents and stakeholder representatives.

The frustration during the public hearings was palpable. Residents – especially applicants for the RREM program – are tired of waiting. I hear their frustration. And I understand it.

I intend to bring you up to date on the progress of the State’s housing recovery programs. I will describe our efforts to help homeowners cut through a cumbersome federal maze. I will also address many of the questions and concerns raised in the previous committee hearing by members of advocacy groups.

But before I tell you about where these programs stand today, I’d like to tell you about how we got here.

The Christie Administration fought hard for federal aid, but unfortunately partisanship in Washington slowed the process down. After Congress enacted a $60 billion Sandy aid package in January 2013, it wasn’t until late May that the first round of the $1.8 billion in federal funds began arriving. Delays getting the resources on the front end, have inevitably led to delays getting the money to people in need.

Now, I know that various advocates have complained that not enough money has gone to certain causes: to homeowners or renters; to low-income or middle-class families; to local governments or statewide infrastructure projects. And you know what – they’re all correct. That’s because HUD has allocated for New Jersey significantly less than warranted. While we are grateful for the $1.8 billion in initial aid, the reality is there are more needs than resources to go around. Sandy caused nearly $37 billion in damage in New Jersey and $42 billion of combined damage in New York State and New York City. But by comparison, New York (State and City) has been awarded a total of $7.1 billion in CDBG Disaster

Recovery funding, while New Jersey has only been awarded $3.2 billion. That $4 billion difference would go a long way here in New Jersey.

Notwithstanding funding disparity, New Jersey is rapidly moving forward with our recovery efforts. In fact, by all objective measures, we are outpacing other Sandy-impacted governments in getting our CDBG allocations to Sandy-impacted residents. We launched 17 CDBG recovery programs within three months of HUD approval. And, nine months after HUD released funds to New Jersey, we have obligated more than $1 billion of the $1.8 billion of recovery funding, with more than 70 percent of the housing funds awarded to low-to-moderate income (LMI) households.

RESETTLEMENT PROGRAM

Chief among our early successes is the Homeowner Resettlement program. These funds provide an incentive for homeowners in the nine most impacted counties to remain in their existing home or in their home county. All of the 18,000-plus applicants who met the program’s eligibility requirements have been approved for a $10,000 grant, and the State has mailed out more than 95% of these checks.

RREM

The State has been able to rapidly distribute Resettlement checks to New Jersey families because there are fewer federal mandates requiring high levels of documentation and environmental reviews. By contrast, the RREM Program, which is a construction-based CDBG recovery program, is highly regulated by the federal government and, as a result, takes longer for grant awards to be finalized and disbursed.

I’m sure many of you heard an earful about these requirements. It was the subject of much consternation during the public hearings. Homeowners are required to: produce income verification to demonstrate they meet program income requirements; provide information on other rebuilding funds so as not to violate federal duplication of benefits laws; obtain a Substantial Damage Letter so we can ensure that our limited federal funds are targeted towards homeowners with the greatest damage; submit receipts for any rebuilding work performed after the storm, as HUD will only reimburse work they consider "reasonable and necessary;" and wait for exhaustive, federally-mandated environmental and historic inspections.

Even with all those steps, more than 5,100 families have received preliminary funding awards. We have completed RREM grant award signings with more than 1,500 homeowners, committing approximately $160 million in grant assistance, including having paid nearly $30 million in reimbursements.

We understand the RREM process is daunting. This is why DCA is constantly working to simplify its many steps, improve customer service, and minimize administrative expenses.

For example, we allowed homeowners to use their own contractors, which has expedited the rebuilding process for many families. Additionally, we were able to obtain approvals from HUD to exempt certain properties from painstakingly slow historic and architectural reviews, reduce the paperwork needed for income verification, and speed up the process of approving reimbursements.

We have also taken direct responsibility for the training and supervision of front-facing staff such as the Housing Advisors that work at the nine Housing Recovery Centers.

Recognizing that many RREM grantees are choosing their own contractors, the RREM program is transitioning from three to two project management firms, and will ultimately go down to one.

And DCA extended the time for applicants to appeal ineligibility determinations for both RREM and Resettlement.

Given pervasive misinformation, I would like to explain the appeals process in detail. Every single applicant deemed ineligible to receive a Resettlement or RREM grant received a letter outlining the reason. There were six reasons for which a homeowner could have been deemed ineligible. I’m holding up those six different letters right now.

Applicants who believed their ineligibility determination was made in error were given 30 days to submit a written appeal, inclusive of supporting documentation. DCA staff then reviewed all incoming appeals and informed applicants of their final determination.

I know that much has been made over the FEMA data that the State used to verify one of the main eligibility criteria. This was the requirement that households must have suffered at least $8,000 in structural damage or one foot of water on the first floor.

The State used this FEMA data because that is exactly what HUD instructed us to do. More to the point, I would like to read from the March 5, 2013 Federal Register, Page 14349. This notice contains instructions from HUD to Sandy-impacted states on how to award CDBG disaster recovery funds. The notice reads, and I quote, "The core data on housing damage for both the unmet housing needs calculation and the concentrated damage are based on home inspection data for FEMA’s Individual Assistance program." It goes on to say, and again I quote, "To meet the statutory requirements of ‘most impacted’ in this legislative language, homes are determined to have a high level of damage if … they have a real property FEMA inspected damage of $8,000 or flooding over 1 foot."

Once our application period closed, we sent out ineligibility letters to those that, according to FEMA’s inspection data, failed to meet the damage threshold. Almost immediately, hundreds of households that received initial ineligibility letters on $8,000 of damage appealed, claiming that they had more damage than FEMA reported. Back in July, as soon as DCA saw that FEMA data was a problem, we immediately enacted a policy change within the HUD rules to broaden the definition to include SBA inspection data on every applicant before making an ineligible determination. And further, we submitted to HUD for approval an Amendment to our Action Plan to allow us to take into account other third-party validating information, such as an insurance appraisal or a flood plain manager assessment. HUD approved our request.

Once we stopped relying solely on FEMA inspection data for the damage threshold determination, we were able to make thousands more eligible for both RREM and Resettlement grants.

As for the 7,000 households currently on the RREM waitlist, DCA recently sent a second round of letters to let them know that due to limited federal funding, the State cannot guarantee that all eligible homeowners will be funded. We also informed them that all applicants who want to know where they stand on the waitlist can simply call 1-855-SANDYHM, and we would let them know.

Before I move on to summarizing some of the State’s other initiatives, I would like to address an irresponsible and offensive allegation about the State’s housing recovery programs. That is the suggestion that race somehow played a role in determining applicants’ eligibility.

Let me be 100 percent clear about this: eligibility and qualification for the housing recovery programs were approved by the Obama Administration, are objectively based, and do not take race or ethnicity into account.

RENTAL HOUSING PROGRAMS

In addition to the Resettlement and RREM Programs, New Jersey is taking bold steps to spur the development of affordable rental housing. The Administration earmarked nearly $400 million from the first CDBG-DR tranche for programs specifically designed for low-income renters and Affordable rental property owners. These funds will increase the stock of affordable rental housing in Sandy-impacted counties, repair affordable rental units left uninhabitable by the storm, and provide options for residents with special needs.

As a result of our investments, the State anticipates that more than 7,000 new affordable housing units statewide will be created over the next two years.

Much media attention has been focused on one of these affordable rental programs, the Fund for Restoration of Multi-Family Housing Program (FRM).

These projects, selected through an open and transparent application process, will rapidly increase the supply of affordable housing stock in the nine most impacted counties. The housing will benefit low-to-moderate income renters while ensuring that funds are spent within two years, a federal reconstruction requirement that, if not satisfied, could require the State to return unspent funds.

The New Jersey Housing and Mortgage Finance Agency (HMFA) scores and ranks applications to the Sandy large multi-family housing program using the same system it has utilized for decades in financing affordable housing developments. The HMFA board selects projects during open public meetings where every project is discussed and voted on. Projects must be "shovel-ready" so construction can begin quickly. Developers – not municipalities – need to proactively apply for these Sandy recovery funds, and must have the support of a municipality to move forward.

TRANSPARENCY

A note about transparency: citizens who want to see how our first round allocation has been spent should visit www.newjerseyrebuild.org. Since October, 2013, DCA has hosted this transparency website that tracks the status of the CDBG Disaster Recovery funds and expenditures in the three sectors of housing, economic development, and infrastructure/public services. The website is sortable by county, municipality, and even legislative district.

In addition, all contracts related to Sandy procurement are posted on the State Comptroller’s NJ Sandy Transparency site.

And detailed FAQ’s regarding DCA’s Sandy-related housing programs are available on the ReNewJersey Stronger website.

CONCLUSION

So yes, there have been great challenges to executing housing recovery following the worst natural disaster in our state’s history. New Yorkers are going through a similar challenging experience post-Sandy. The Gulf Coast states are not where they wanted to be some eight years after Katrina. But New Jersey is working hard to get these very limited funds to the residents and communities that need them.

Mr. Chairman, I really do appreciate the opportunity to speak before this committee today. I welcome the committee’s questions.